©2015, College for Financial Planning, all rights reserved.

Session 15Automobile Insurance

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMFinancial Planning Process & Insurance

Session Details

Module 9

Chapter(s)

4

LOs 9-9 Explain a characteristic of personal auto policy coverage.

15-2

Accident Claim Quotes

“Coming home I drove into the wrong house and collided with a tree I don't have.”

“I was on my way to the doctor with rear end trouble when my universal joint gave way, causing me to have an accident.”

“To avoid hitting the bumper of the car in front, I struck the pedestrian.”

“The guy was all over the road. I had to swerve a number of times before I hit him.”

“The pedestrian ran for the pavement, but I got him.”

15-3

The Planner’s Role

• Identify the amount a client can afford to lose via deductible or coverage limits

• Recognize the amount at risk with uninsured/under-insured motorists coverage

• Focus on liability issues – car lost is least financial risk

• Coordinate with umbrella coverage• Make appropriate referrals

15-4

Potential Losses

• There are two types of loss to assess:o Initial deductibleo Policy limits

• Factors to considero Emergency funds to cover deductibleo Umbrella coverage integration to cover

liabilityo Net worth and/or 7x income – liability to covero Disability coverage – uninsured/underinsured

motoristso Family members – uninsured/underinsuredo Health insurance

15-5

Replacement Cost or Actual Cash Value

15-6

Auto Policy Structure (PAP)

• Liability coverage (the BIGGEST risk)• Medical payments• Uninsured motorist coverage• Underinsured motorist coverage• Physical damage/collision• Physical damage/other than collision• Duties of an insured after a loss or

accident• General provisions

15-7

Automobile Liability Coverage

• Liability coverage does not protect against loss to your own property (i.e., you cannot be liable to yourself)

• Typical split-limit liability auto coverage example: 100/300/100o Bodily injury (liability to others)

covered up to $100,000 per persono Bodily injury (liability to others)

covered up to $300,000 per accident

o Property damage (liability to others)covered up to $100,000

• State minimum coverage is generally inadequate coverage to meet liabilitieso May be only 20/40/10

15-8

State Plans Used to Compensate Victims of Auto Accidents

15-9

No-Fault Plans

15-10

The Underinsured Motorists Issue

Risk: If a client or family member is seriously injured or permanently disabled, is the coverage enough?

$25,000 could be the minimum state limit. If covered with health insurance, health costs may be covered but what about loss of income or ability to earn an income?

Minimal cost to cover; may be able to cover additional under umbrella policy based on state and company.

15-11

The Personal Auto Policy (PAP)

15-12

Question 1

A client mentions that her brother and nephew are going to move in with them for the next year because they are going through a rough patch after a spouse’s death and business loss. She figures it will allow them to get back on their feet. They are going to pay some minimal rent of $200.They will be able to save expenses, such as rent and having a second car for the nephew because he will be able to use theirs. The nephew has had some trouble with drugs and alcohol this last year receiving a DUI, which they hope the counseling they are going to pay for will help. What issues should you as their planner raise?

a. property coverage b. automobile coverage for nephewc. disclosure to insurance company about DUI and

additional residentsd. umbrella coveragee. all of the above

15-13

Question 2

The PAP endorsement that covers people who borrow cars is known asa. extended liability coverage.b. the named non-owner endorsement.c. the motor home endorsement.d. the miscellaneous-type vehicle

endorsement.

15-14

Question 3

Which one of the following systems of handling automobile claims does not allow an insured to sue another driver or the other driver’s insurance company?a. traditional tort systemb. pure no-faultc. modified no-faultd. expanded no-fault

15-15

©2015, College for Financial Planning, all rights reserved.

Session 15End of Slides

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMFinancial Planning Process & Insurance